November 2016

THIS MONTH:
Conduct Final Year-end Planning
November 24th
Thanksgiving

In this issue:

As the year winds down, please take a moment to review your situation. 2017 tax figures and some suggestions to help protect yourself from a new area of cyber security risk round out this month’s newsletter.

Breaking News: 2017 Retirement Contribution & Social Security Limits

If you have not already done so, now is the time to plan for contributions into your retirement accounts in 2017.

Retirement Contribution Limits

Retirement Program 2017 2016 Change Age 50 or over catch up
IRA: Traditional $5,500 $5,500 none add: $1,000
IRA: Roth $5,500 $5,500 none add: $1,000
IRA: SIMPLE $12,500 $12,500 none add: $3,000
401(k), 403(b), 457 plans $18,000 $18,000 none add: $6,000

Social Security

Item 2017 2016 Change Comment
Wages Subject to Social Security $127,200 $118,500 +$8,700 Annual Social Security employee tax: $7,886.40
Average Estimated Monthly Retirement Benefit $1,360 $1,355 +$5 Change in estimated amount

Don’t forget to account for any matching programs offered by your employer as you determine your various funding levels for next year.

Change Your Passwords Now

New internet vulnerability discovered

A recent internet attack in the eastern United States by hackers opens up a new area of vulnerability for all of us. Here is what you need to know.

What is new

This recent cyber attack hijacked many computing devices. The attack took over these devices and used their computing power to attack a large internet provider. The result was some large services having their sites slow to a crawl and temporarily shut down from this massive attack.

The new, and disturbing, change is what kinds of computing devices are now being taken over. They are non-computer devices with internet connectivity. They include things like baby monitors, home security systems, and smart TVs. This new technology is targeting devices that traditionally have low or no security measures in place.

Change your password

The biggest thing you can do to protect yourself is to make it a habit to change the passwords on all your devices. Here are some other suggestions.

  • Identify your devices. Go through your home and create a list of all devices that could be vulnerable to hackers. Anything that has internet connectivity can be vulnerable. Smart TVs, game consoles, TV set boxes (like Roku and Apple TV), thermostats, security systems, baby monitors, and more.
  • Check new purchases. More and more appliances are being loaded with computer technology. Some of these devices do not have security protection in them, others have factory settings that most of us do not change. Know what you are buying before you buy.
  • Reset the passwords. When installing a new smart device, immediately change the password. If professionally installed, change the password from the one set by the installation company.
  • Periodically change your passwords. Create a system to update and change all your passwords on a regular basis. This can create havoc as remembering this changing password landscape can be a real burden. So develop a system that is easy for you to remember but virtually impossible for a cyber thief.

Tick Tock. Tax Reduction Ideas Still Available

As the end of the year approaches, there is still time to make moves to manage your tax liability. Here are some ideas to consider.

  • Maximize your retirement plan contributions. This includes traditional IRAs, Roth IRAs, and SEP IRAs for self-employed. Given the contribution limits in 2017 are not increasing, now is the time to maximize the contribution potential for this year and plan for next year’s contributions.
  • Estimate your current and next year taxable income. With this estimate you can determine which year receives the greatest benefit from a reduction in income. By understanding what the tax rate will be for your next dollar earned, you can understand the tax benefit of reducing income in this year versus next year.
  • Make charitable contributions. Consider which tax year will benefit most from your charitable giving of cash and non-cash items. Shift your giving into the year that will provide you the most benefit.
  • Take capital losses. Each year you can net capital losses against capital gains. You can also deduct up to $3,000in excess losses against your other income. Start to identify which investments may make sense to sell to take advantage of this. If planned correctly, these losses can offset ordinary income.
  • Consider donating appreciated stock. This strategy gives you a charitable deduction for the market value of the stock while not having to pay capital gains tax on the charitable gift. If you provide an annual pledge sheet to your church, this can be a great way to maximize your gift while giving needed funds to your church at the beginning of the year.
  • Standard or itemized deductions. The standard deduction for 2016 is $12,600 for joint filers and $6,300 for single filers. If your itemized deductions are close to these amounts, consider shifting the deductions into next year. You can then maximize the benefit of itemizing into one tax year.
  • Retirement plan distributions. If you are age 70½ or older, take your required minimum distributions for the year. If you are retired, but younger than 70½, consider taking tax efficient distributions from your retirement accounts. By paying some tax now, you may avoid paying higher taxes later when you have to follow the minimum distribution rules.
  • Consider tax legislation. Please recall that tax laws passed in late 2015 made many temporary tax savings permanent and extended others into 2016. So save classroom related receipts if you are a teacher. Consider charitable contributions from your retirement plan if you are a senior. Keep receipts of large purchases to track a potential sales tax deduction.
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